Alhassen dealership sale may finalize soon

WEST COVINA >> Despite claiming it would continue a stay, the city failed to post a $2.5 million bond that would delay developer Ziad Alhassen from regaining control of three dealership properties in the auto mall.

The city could not post the bond because of “financial constraints,” according to court documents.

Once the sale closes between Alhassen’s Dighton America and the bankruptcy trustee, West Covina’s attempt to appeal the sale will also likely end. Bankruptcy law stipulates that an appellate court can not undo sale once it concludes, according to the documents.

“In light of the substantial risk that the very serious legal and factual issues raised in this appeal will be mooted if a decision on this appeal is delayed, the City respectfully urges the Court to decide this appeal as soon as possible,” the city’s attorneys wrote in a brief to U.S. District Court Judge Christina Snyder. Snyder previously granted a temporary stay on the sale and gave city officials until Nov. 18 to post $2.5 million in collateral to maintain it. When the city failed to post the bond, the stay ended.

City Attorney Arnold Alvarez-Glasman told this newspaper he was directed to post the bond in a closed session vote by the city council. He declined to say where the money would come from.

“The City and Successor Agency is currently processing the steps necessary to post the bond and until that is completed, the source of the funds is an internal activity and will not be disclosed at this time,” he wrote.

According to Trustee Howard Ehrenberg, the attorneys continued to say they would post the bond as late as the morning of Nov. 18.

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“I don’t know when it is that they decided not to,” he said. City Council did not have any meetings between authorizing the bond and failing to meet the deadline.

“We have now contacted escrow and the buyer and buyer’s lender,” Ehrenberg said. “We’re proceeding to close the sale. But quite frankly, we were expecting that the city was going to post their bond, so we were somewhat surprised that they hadn’t. Therefore the sale was not ready to close immediately on Tuesday morning.”

Both sides of the case filed briefs Nov. 20 as part of the appeal process. Judge Snyder will review those briefs and decide whether another hearing is needed before she makes her ruling.

The next step will rely on whether Snyder makes a decision before the sale closes.

“It is somewhat surprising that the city would not post the bond, given their acknowledgement that if the sale closes, it would not likely be reversible,” Ehrenberg said.

The city expects to pay roughly $1.9 million between January to June 2014 to legal firms working on this case, according to a recognized obligation payment schedule submitted to the Department of Finance.

The city already paid out more than $1.4 million to unidentified firms for various legal services between July 2013 and December 2013. At least $600,000 of that was slated to go to Squire Sanders, the firm leading the city’s fight against Alhassen.

Those payments come from a Redevelopment Property Tax Trust Fund set up to help phase out redevelopment agencies across the state. West Covina has $303 million in outstanding debts or obligations left over from its redevelopment agency, according to its payment schedule.